Federal COVID-19 Response Leaves Some Cannabis Businesses in the Cold

As businesses around the United States reckon with the unfolding realities of the COVID-19 pandemic, the cannabis industry has continued to experience the consequences of divergent federal and state policies.

On one hand, the hemp side of the cannabis industry is reaping the rewards of national legalization by way of the 2018 Farm Bill. Lawful hemp businesses generally have access to the relief being offered to businesses through the Coronavirus Aid, Relief, and Economic Security Act — the CARES Act — and other avenues of potential federal relief.

Distinctions Between Hemp and Marijuana Businesses

But for marijuana businesses, on the other hand, even while cities and local jurisdictions around the countries declare them “essential” — allowed to remain open when others are forced to shut their doors — virtually none of the federal government’s coronavirus-related relief will be accessible. This includes small business loans under the Paycheck Protection Program.

This distinction between access for types of cannabis business exists because of continuing federal prohibition on marijuana, still deemed a Schedule I controlled substance in spite of its legalization in some form or variety in a majority of American states and in countries around the world.

Many Marijuana Businesses Ineligible To Receive SBA Loans

The Small Business Administration (“SBA”) has established guidelines whereby Direct Marijuana Businesses — those whose activities directly touch marijuana— are ineligible to receive SBA backed loans. This policy applies even if the business is lawful and otherwise compliant with state and local regulations in its place of business.

SBA’s policy may further exclude two other categories of businesses, Marijuana-Related Businesses and Indirect Marijuana Businesses, which are each governed by broad and wide-reaching definitions.

With or Without Relief, Cannabis Businesses Still Navigate FFCRA and Uncertainty

In the meanwhile, however, all cannabis businesses are still having to navigate the same questions as so many other employers around the country, including understanding their own obligations imposed by other coronavirus-related legislation, like the Families First Coronavirus Response Act (FFCRA). Despite being cut off from the relief being offered through the federal government’s coronavirus legislation, marijuana businesses are not likewise relieved from the responsibilities created for employers under the same laws.

With or without the benefit of federal protections, this environment is not easy for any business. Every company is thinking about the well-being of their employees and their families, policies around sick leave and other virus-related events, whether and how to maintain hours and wages, how to initiate remote working procedures, or how to comply with social distancing and safety orders, to name some examples. But on top of these decisions and dilemmas, and in addition to the day-to-day compliance work that all regulated marijuana businesses must carefully do, these businesses are being frozen out of relief which many could use in these times.

Any business concerned with the implications of COVID-19 relief legislation or attempting to navigate legal issues related to the same or their general business operations in these times should consult with an attorney. The information provided herein is not intended as legal advice, is not comprehensive, and is intended only to summarize certain observations regarding potential consequences for cannabis businesses during the unfolding COVID-19 pandemic.